Q3 2024 HEICO Corp Earnings Call

August 27, 2024

Speaker Change: i

Samera: Welcome to the HICO Corporation, third quarter 2024 financial results call. My name is Samera and I will be your operator for today's call.

Speaker Change: Certain statements in this conference call will constitute forward-looking statements, which are subject to risks, uncertainties, and contingencies. Hikos' actual results may differ materially from those expressed in or implied by those forward-looking statements.

Speaker Change: factors that can cause such differences include among other things, the severity, magnitude and duration of public health threats, such as the COVID-19 pandemic.

Speaker Change: High Coast liquidity and the amount in timing of cash generation, lower commercial air travel, airline fleet changes, or airline purchasing decisions, which could cause lower demand for our goods and services.

Speaker Change: Product Specification Costs Ammo Requirements, which could cause an increase to our costs to complete contracts.

Speaker Change: and regulatory demands, export policies and restrictions, reductions in defense, space, or homeland security spending by U.S. and or foreign customers, or competition from existing and new competitors, which could reduce our sales.

Speaker Change: are ability to introduce new products and services at profitable pricing levels, which could reduce our sales or sales growth.

Speaker Change: Product Development, or Manufacturing Difficulties, which could increase our product development and manufacturing costs and delay sales, cybersecurity events or other disruptions of our information technology systems, could adversely affect our business.

Speaker Change: and our ability to make acquisitions including obtaining any applicable domestic and or foreign governmental approvals and achieve operating synergies from acquired businesses.

Speaker Change: Customer Credit Risk, Interest Foreign Currency Exchange and Income Tax Freeds.

Speaker Change: and Economic Conditions, including the effects of inflation, within and outside of the aviation defense.

Speaker Change: Space, Medical, Telecommunications, and Electronics Industries, which could negatively impact our costs and revenues.

Speaker Change: Parties listening to this call are encouraged to review all of Hiko's feelings within.

Speaker Change: The Securities and Exchange Commission, including but not limited to filings on Form 10K, Form 10Q and Form 8K.

Speaker Change: We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except the extent required by applicable law.

Speaker Change: I now turn the call over to Lauren's Mendelson, High Coast Chairman and Chief Executive Officer.

Lauren's Mendelson: There are a thank you very much and good morning to everyone on this call. We thank you for joining us and we welcome you to this HICO Third Quarter Fiscal 24 earnings announcement tell the conference.

Lauren's Mendelson: I'm Larry Mendelson, Chairman and CEO of Hight Go Corporation, and I am joined this morning by Eric Mendelson, Hight Go's Co-President, and President of Hight Go's Flight Support Group.

Speaker Change: Michael's co-president and president of Michael's electronic technology group in Carlos McCow, our Executive Vice President and CFO.

Speaker Change: Now, before reviewing our operating results, I'd like to take a moment and thank all of Hikos talented team members for their contribution to our record setting performance.

Speaker Change: Your continued focus on exceeding customer expectations and operational excellence translated into excellent results for our shareholders and I continue to be very optimistic about the future of HICO.

Speaker Change: Over the past.

Speaker Change: 16 quarters.

Speaker Change: Leave experience in credible growth in our commercial aviation markets after emerging from one of the darkest times in aerospace history. When air travel slowed to a call amid COVID-19 pandemic.

Speaker Change: I couldn't be proud of the professionalism and tenacity of our team members who demonstrated serving our customers during this period of rapid growth.

Speaker Change: their ability to meet the challenge of accelerated growth is commendable. This includes the remarkable Wincore team members who joined Hikov family last year.

Speaker Change: In addition, I am pleased with the progress and effort of our team members have made serving customers in the defense industry.

Speaker Change: is my expectation that growth in this global industry will continue despite who wins the upcoming elections.

Speaker Change: and the software results we realize over the past few years appear to be in the rear view mirror.

Speaker Change: And now I'd like to summarize the highlights of our third quarter fiscal 24 record results.

Speaker Change: Consolidated operating income and net sales in the third quarter of fiscal 24, represent record results for HICO.

Speaker Change: and improved by 45% and 37% respectively as compared to the third quarter fiscal 23.

Speaker Change: I think you'll all agree that films are astounding, we're supposed to.

Speaker Change: Consolidated net income increased 34%.

Speaker Change: [inaudible]

Speaker Change: for 97 cents per diluted share in the 3rd quarter of fiscal 24. And that was up from 102 million, was 74 cents per diluted share in the 3rd quarter of fiscal 23.

Speaker Change: The flight support group set all time quarterly net sales and operating income records in the third quarter of fiscal 24, improving 68%.

Speaker Change: and 272 percent, respectively, over the third quarter of fiscal 23.

Speaker Change: The increase is principally reflexed from 15% organic growth, mainly attributable to increased the man for the flight support groups.

Speaker Change: Commercial Aerospace Products and Services, and the impact from our profitable fiscal 23 and 24 acquisitions.

Speaker Change: and solidated EBITDA, increased 45%.

Speaker Change: 261.4 million in the third quarter of fiscal 24 and that was up from 179.8 million in the third quarter of fiscal 243.

Speaker Change: Our net debt to Evid Darracio was 2.1 more times as of July 23, 24.

Speaker Change: and that was down from 3.04 times as of October 31, 23. Our excellent operating

Speaker Change: have allowed us to early achieve the forecast we made a year ago.

Speaker Change: that our net debt to EBITDA ratio would return to a historical level of about two times within roughly one year to 18 months.

Speaker Change: following the Wencor acquisition and that's excluding any impact of further acquisitions.

Speaker Change: Our acquisition pipeline is extremely robust with opportunities in both flight support and E.T.G.

Speaker Change: and we intend to follow our time test its strategy of opportunistic acquisitions that continue to expand the cash-generating ability of Hiko.

Speaker Change: Cash Flow, provided by operating activities increased 47% to 214 million in the third quarter of fiscal 24. And that was up from 145.9 million in the third quarter of fiscal 23.

Speaker Change: In July, 24, we increased our regular semi-anural care dividend by 10% to 11 cents per share.

Speaker Change: This represented our 92nd consecutive semi-animal care student since 1979.

Speaker Change: I'd like to now discuss a recent acquisition activity.

Speaker Change: You may recall in December 23, we announced the acquisition of exclusive perpetual licenses and certain assets from Honeywell International.

Speaker Change: The support the Boeing 737 NG and the triple 7 cockpit display and legacy displays product lines.

Speaker Change: which that total group has been performing extremely well for us.

Speaker Change: at the result in May 24.

Speaker Change: We completed a second transaction with Honeywell International, under which we acquired additional licenses.

Speaker Change: and certain assets to further enhance the manufacturing of these new products, including screens for military variants of the Boeing 737 in G.

Speaker Change: and triple seven cockpit displays and legacy displays, product lines.

Speaker Change: Last week.

Speaker Change: we announce.

Speaker Change: and a flight support group acquired the aerial delivery and decentic envisions.

Speaker Change: of Cakewell Aerial Systems.

Speaker Change: purchased price of this acquisition, the Spain and cash.

Speaker Change: is a principally-using proceeds from our revolving credit facility. And we expect this acquisition would be a creative to our earnings within the first year following the acquisition.

Eric Mendelson: at this time, I would like to introduce Eric Mendelson, co-president of psychosis.

Eric Mendelson: Hi, girl, and president of HiCov, Flight Support Group. And he will discuss the third quarter results of the Flight Support Group, Eric.

Eric Mendelson: Thank you very much.

Eric Mendelson: The Flight Support Groups niche sales increased 68% to a record 681.6 million in the third quarter of fiscal 24, up from 405 million in the third quarter of fiscal 23.

Speaker Change: The net sales increase reflects the impact from our fiscal 23 and 24 acquisitions and strong 15% organic growth.

Speaker Change: The organic net sales growth mainly reflects increased demand across all of our product lines.

Speaker Change: As we continue to experience excellent organic growth within the FSG, we have also been highly successful in supplemental, supplementing growth through acquisitions.

Speaker Change: Last week, we acquired Capwell, a Connecticut-based leading provider of proprietary aircraft, cockpit, emergency egress, and aerial delivery products for both the commercial aerospace and defense markets.

Speaker Change: I am very impressed with their manufacturing process and strict adherence to high reliability in quality products which help ensure pilot and crew safety worldwide.

Speaker Change: They also have an excellent staff of people who will fit extremely well within the high-go family.

Speaker Change: The Wayne Corps Operations continue to exceed our expectations, and we are convinced this was an excellent investment for HICO.

Speaker Change: Winchlor's entrepreneurial culture and a record of producing high-quality products continues to produce wins in the marketplace.

Speaker Change: Our customers continue to find great value in our larger aftermarket product offerings for their aerospace parts and component repair in overall needs.

Speaker Change: We continue to operate Wenquart as a stand-alone business operation, however we've made very good progress in working together and serving our customers in a combined seamless fashion.

Speaker Change: Some examples of how we're now working together in Cvode.

Speaker Change: 1. Utilization of all Heiko and Wincore PMAs in DERs at all of our repair stations. 2. Commercial and Defense aftermarket sales cooperation.

Speaker Change: 3. Wincore e-commerce platform lists all hypotenom competitive PMAs.

Speaker Change: For, when court is utilizing high-ghost manufacturing base, in particular, are specialty products in electronic technology's group, to quote new products.

Speaker Change: 5 Engineering and Regulatory Cooperation

Speaker Change: Sticks, sharing besting class vendors

Speaker Change: and seven driving various back office synergies such as payroll and export compliance that will help offset the cost of additional regulatory compliance, such as Serbans Axelate and Hicos FAA ODA Program.

Speaker Change: The fight support groups operating income increase 72% to a record 153.6 million in the third quarter of fiscal 24. Up from 89.2 million in the third quarter of fiscal 23.

Speaker Change: The operating income increase, principally reflects the previous we mentioned net sales growth, and then improved gross profit margin, partially offset by an increase in intangible asset amortization expense.

Speaker Change: The fight support groups operating margin increased to 22.5% in the third quarter of fiscal 24, up from 22.0% in the third quarter of fiscal 23.

Speaker Change: given that acquisition-related, intangible, amortization expense consumed approximately 270 basis points.

Speaker Change: of our operating margin in the third quarter of fiscal 24. The FST's cash margin.

Speaker Change: before amortization or e-beda.

Speaker Change: was approximately 25.2%.

Speaker Change: which is excellent in absolute terms and is 180 basis points higher than the comparable flight support group cash margin of 23.4% in the third quarter of fiscal 23.

Speaker Change: I am extremely pleased that these results.

Speaker Change: The increased operating margin, principally reflects the previously mentioned improved gross profit margin.

Speaker Change: as well as lower acquisition costs.

Speaker Change: partially offset by the previously mentioned higher intangible asset amortization expense.

Victor Mendelson: Now, I would like to introduce Victor Mendelson, co-president of Heiko, and President of Heiko's electronic technology group to discuss the third quarter results of the electronic technology group. Victor?

Samara: 24 Financial Results Call. My name is Samara and I will be your operator for today's call. Certain statements in this conference call will constitute forward-looking statements, which are subject to risks, uncertainties, and contingencies. Heiko's actual results may differ materially from those expressed in or implied by those forward-looking statements. Factors that could cause such differences include, among other things, the severity, magnitude, and duration of public health threats, such as the COVID-19 pandemic, Heiko's liquidity and the amount in timing of cash generation, lower commercial air travel, airline fleet changes, or airline purchasing decisions, which could cause lower demand for our goods and services.

Operator: 24 Financial Results Call. My name is Samara and I will be your operator for today's call. Certain statements in this conference call will constitute forward-looking statements, which are subject to risks, uncertainties, and contingencies. Heiko's actual results may differ materially from those expressed in or implied by those forward-looking statements. Factors that could cause such differences include, among other things, the severity, magnitude, and duration of public health threats, such as the COVID-19 pandemic, Heiko's liquidity and the amount in timing of cash generation, lower commercial air travel, airline fleet changes, or airline purchasing decisions, which could cause lower demand for our goods and services.

Victor Mendelson: Thank you, Eric. The electronic technology's groups net sales were $322.1 million in the third quarter fiscal 24 as compared to $325.9 million in the third quarter fiscal 23.

Victor Mendelson: The slight net sales decrease, principally reflects lower other electronics and medical products, net sales, partially offset by increased defense space and aerospace products, net sales.

Speaker Change: This is in line with our expectations, as we've commented on earnings conference calls over the last few quarters, and is consistent with inventory destocking in some customers.

Speaker Change: We continue to anticipate quarterly volatility in the E.T.G. defense net sales, but the overall trend remains very positive.

Samara: Product specification costs and requirements, which could cause an increase to our costs to complete contracts, governmental and regulatory demands, export policies and restrictions, reductions in defense, space, or homeland security spending by US and or foreign customers, or competition from existing and new competitors, which could reduce our sales. Our ability to introduce new products and services at profitable pricing levels, which could reduce our sales or sales growth. Product development or manufacturing difficulties, which could increase our product development and manufacturing costs and delay sales, cybersecurity events, or other disruptions of our information technology systems, could adversely affect our business, and our ability to make acquisitions, including obtaining any applicable domestic and or foreign governmental approvals, and achieve operating synergies from acquired businesses, customer credit risk, interest, foreign currency exchange, and income tax rates, and economic conditions, including the effects of inflation, within and outside of the aviation, defense, space, medical, telecommunications, and electronics industries, which could negatively impact our costs and revenues. Parties listening to this call are encouraged to review all of HICO's filings within the Security and Exchange Commission, including but not limited to filings on form 10K, form 10Q, and form 8K.

Operator: Product specification costs and requirements, which could cause an increase to our costs to complete contracts, governmental and regulatory demands, export policies and restrictions, reductions in defense, space, or homeland security spending by US and or foreign customers, or competition from existing and new competitors, which could reduce our sales. Our ability to introduce new products and services at profitable pricing levels, which could reduce our sales or sales growth. Product development or manufacturing difficulties, which could increase our product development and manufacturing costs and delay sales, cybersecurity events, or other disruptions of our information technology systems, could adversely affect our business, and our ability to make acquisitions, including obtaining any applicable domestic and or foreign governmental approvals, and achieve operating synergies from acquired businesses, customer credit risk, interest, foreign currency exchange, and income tax rates, and economic conditions, including the effects of inflation, within and outside of the aviation, defense, space, medical, telecommunications, and electronics industries, which could negatively impact our costs and revenues.

Speaker Change: has expected other electronic net sales were lowered during the third quarter of

Speaker Change: Fiscal 24, compared to the third quarter of Fiscal 23.

Speaker Change: We believe these order trends in these markets have bottomed, and we are seeing improved orders in some of our companies in these other markets. These other markets typically equate to between a quarter and 30 percent of our sales.

Speaker Change: I continue to expect an overall return to growth in these and markets and businesses during the first half of fiscal 25.

Speaker Change: The ETG's record backlog and strong overall orders support our optimism and, as the non-ADI markets improve, we expect to help the tailwind into our next fiscal year.

Speaker Change: orders for commercial aviation and defense products had been very robust and we are very pleased with how businesses performance, like it accelerates, which continues to be a strong acquisition, meeting our performance expectations, including growing its profit margin.

Speaker Change: Further, our order book and quotation activity for fiscal 26 is building nicely. And I did mean to say fiscal 26 in addition to 25 of the course, which augments our optimism for later periods.

Operator: Parties listening to this call are encouraged to review all of HICO's filings within the Security and Exchange Commission, including but not limited to filings on form 10K, form 10Q, and form 8K. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except to the extent required by applicable law.

Speaker Change: The Electronic Technology Groups

Speaker Change: Operating margin improved 23.5% in the third quarter of fiscal 24.

Speaker Change: Up from 22.8% in the third quarter of fiscal 23.

Samara: We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except to the extent required by applicable law.

Speaker Change: I also note that before acquisition-related intangibles amortization expenses, our operating margin was above 27%. As those intangibles amortization expenses consume around 400 basis points of our margin.

Lawrence Mendelssohn: I now turn the call over to Lawrence Mendelssohn, HICO's Chairman, and Chief Executive Officer. There, thank you very much, and good morning to everyone on this call. We thank you for joining us, and we welcome you to this HICO third quarter fiscal 24 earnings announcement teleconference. I'm Larry Mendelssohn, Chairman and CEO of HICO Corporation, and I am joined this morning by Eric Mendelssohn, HICO's co-president, and president of HICO's light support group. Victor Mendelssohn, HICO's co-president, and president of HICO's Electronic Technologies Group, and Carlos Macau, our Executive Vice President and CFO.

Speaker Change: and that's how we judge our businesses.

Speaker Change: as that most closely correlates to our catch. So when we look at how our businesses are doing on an operating basis, we are very pleased with the overall margins and their continued improvement.

Speaker Change: The operating margin increased principally reflects the previously mentioned improved gross profit margin, partially offset by lower level of SGNA efficiencies.

Lawrence Mendelssohn: I'm Larry Mendelssohn, Chairman and CEO of HICO Corporation, and I am joined this morning by Eric Mendelssohn, HICO's co-president, and president of HICO's light support group.

Speaker Change: from the call back over to Larry Mendelson.

Larry Mendelson: Thank you, Victor. Now for the outlook.

Larry Mendelson: As we look ahead to the remainder of fiscal 24, we remain optimistic about achieving net sales growth for both FST and ETG.

Lawrence Mendelssohn: Victor Mendelssohn, HICO's co-president, and president of HICO's Electronic Technologies Group, and Carlos Macau, our Executive Vice President and CFO. Now, before reviewing our operating results, I'd like to take a moment and thank all of Heiko's talented team members for their contribution to our record setting performance. Your continued focus on exceeding customer expectations and operational excellence, translated into excellent results for our shareholders. And I continue to be very optimistic. About the future of Heiko.

Lawrence Mendelssohn: Now, before reviewing our operating results, I'd like to take a moment and thank all of Heiko's talented team members for their contribution to our record setting performance. Your continued focus on exceeding customer expectations and operational excellence, translated into excellent results for our shareholders. And I continue to be very optimistic. About the future of Heiko.

Speaker Change: This growth is expected to be largely fueled by the contributions from our fiscal 23 and 24 acquisitions, along with sustained demand for the majority of our products.

Speaker Change: Additionally, we are committed to ongoing product and service innovation.

Speaker Change: further market penetration and maintaining our financial strength and flexibility.

Speaker Change: In conclusion, I want to again express my gratitude to the exceptional team members for their un-wavering support and dedication to the high-gone.

Lawrence Mendelssohn: Over the past 16 quarters, we've experienced incredible growth in our commercial aviation markets after emerging from one of the darkest times in aerospace history when air travel slowed to a crawl amid COVID-19 pandemic. I couldn't be prouder of the professionalism and tenacity of our team members who demonstrated serving our customers during this period of rapid growth. Their ability to meet the challenge of accelerated growth is commendable. And this includes the remarkable win-core team members who joined Heiko family last year.

Speaker Change: Our strategy of building a diversified portfolio of outstanding businesses continues to deliver positive outcomes for our shareholders.

Speaker Change: Our team markets are very strong, and in fiscal 24, he's shaping up to be another successful year.

Speaker Change: Thank you, as you are always for your continued trust, and as I mentioned before, I remain very optimistic about the future for a high-go.

Speaker Change: and now we'll open the four two questions.

Speaker Change: Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad.

Lawrence Mendelssohn: In addition, I am pleased with the progress and effort of our team members have made serving customers in the defense industry. It is my expectation that growth in this global industry will continue despite who wins the upcoming elections. And the softer results we realize over the past few years appear to be in the rearview mirror.

Speaker Change: If you are using a speaker phone, please make sure your mute function is turned off to allow your signal to reach order equipment. Again, press star 1 to ask a question and we'll pause for just a moment to allow everyone an opportunity to signal for questions.

Speaker Change: We'll take our first question from Robert Spingarne with Melia's research.

Lawrence Mendelssohn: And now I'd like to summarize the highlights of our third quarter fiscal 24 record results. Consolidated operating income and net sales in the third quarter of fiscal 24 represent record results for Heiko and improved by 45% and 37% respectively as compared to the third quarter of fiscal 23. I think you'll all agree that those are astounding resource. Consolidated net income increased 34%. Who erected 136.6 million dollars for 97 cents per diluted share in the third quarter of fiscal 24.

Speaker Change: Welcome morning and at very nice quarter.

B.O.: Thank you very much Rob. Good morning, B.O. Thank you.

Robert Spingarne: Couple, I thought I'd start with the end-market and

Robert Spingarne: [inaudible]

Speaker Change: and the end market, NAFTA Market.

Speaker Change: Yeah, I see, that's a great question, Rob, and I've spent a lot of time in business reviews and with ourselves folks in particular over the last month going over a lot of the details. There's no question that the market remains strong, but I do think the reason why

Lawrence Mendelssohn: And that was up from 102 million was 74 cents per diluted share in the third quarter of fiscal 23. The flight support group set all time quarterly net sales and operating income records in the third quarter of fiscal 24 improving 68% and top 72% respectively over the third quarter of fiscal 23. The increase is principally reflect strong 15% organic growth mainly attributable to increase demand for the flights of fourth groups to commercial aerospace products and service, and the impact from our profitable fiscal 23 and 24 acquisitions.

Speaker Change: the said, you know, the incredible 17% growth rate.

Speaker Change: was so outstanding.

HICO: is because of really two factors. One, we continue to win in the marketplace. And, you know, HICO is...

HICO: and accumulation or a combination.

HICO: of a lot of individual businesses working as hard as they can, planning years in advance, developing these products, having them on the shelf.

HICO: and being able to...

HICO: hit the demand and get them sold when the market needs them. So I think that's number one, really everybody's sort of, if you will, all the unsung heroes who are working their rear ends off every day to make this happen. So that's probably the first reason.

Lawrence Mendelssohn: Consolidated Ibiza increased 45%, the 261.4 million in the third quarter of fiscal 24, and that was up from 179.8 million in the third quarter of fiscal 24-3. Our net debt to Ibiza ratio was 2.1 more times as of July 20, 31, 24, and that was down from 3.04 times as of October 31, 23. Our excellent operating results have allowed us to early achieve the forecast we made a year ago that our net debt to Ibiza ratio would return to a historical level of about two times within roughly one year to 18 months following the one core acquisition, and that's excluding any impact of further acquisitions.

HICO: The second would definitely be due to the addition of Lencourt and the broadening of our product line. I think in speaking with our customers.

HICO: We are viewed as a much more complete supplier. I mean, HIKO today has transitioned tremendously over the last many decades.

HICO: and I think our customers are in the same way.

HICO: are very confident in purchasing additional products from us, whether it's parts, distribution, PMA repair, and I think we're growing our market share.

HICO: So it's really, I think, yes, the strong market, but more, I think really focusing on the detail by our businesses and the broadening of the product line through Wincor and the 737 and Criple 7 display unit acquisitions.

Speaker Change: Okay, and then notwithstanding the strong growth, you know, there have been some airlines out there talking about over capacity that's been a bit of a theme. Here are you seeing any evidence of that in the order patterns?

Speaker Change: So far.

Speaker Change: No, we really don't, actually, and as a matter of fact, the number of airlines had sort of trimmed back their purchases, they, if you will, in hindsight, I think, over order to bet in 2023.

Lawrence Mendelssohn: Our acquisition pipeline is extremely robust with opportunities in both flight support and ETG, and we intend to follow our time-tested strategy of opportunistic acquisitions that continue to expand the cash generating ability of Heico. Cash flow provided by operating activities increased 47%, the 214 million in the third quarter of fiscal 24, and that was up from 145.9 million in the third quarter of fiscal 23. In July 24, we increased our regular semi-annual cash dividend by 10% to 11 cents per share. This represented our 92nd consecutive semi-annual cash dividend since 1979.

Speaker Change: was more than they needed in 2023, so we do have anecdotal evidence of certain customers cutting back this year, but that was really offset by strengths that other customers.

Speaker Change: So I think we continue to do very well and that really...

Speaker Change: that gets to the beauty of the Heiko model and that we've got all these individual business units.

Speaker Change: who have to control their own destiny. And if they're short in one area, they figure out how to make it up in another area. And this doesn't roll up to my desk.

Lawrence Mendelssohn: In July 24, we increased our regular semi-annual cash dividend by 10% to 11 cents per share. This represented our 92nd consecutive semi-annual cash dividend since 1979.

Speaker Change: after the fact, and instead they're doing this real time, so in summary, no, I mean the market for us remains quite strong.

Speaker Change: Okay, and then just on the OE side, both you and Victor have

Lawrence Mendelssohn: I'd like to now discuss our recent acquisition activity. You may recall in December 23, we announced the acquisition of exclusive perpetual licenses and certain assets from Honeywell International to support the Boeing 737 NG and the trickle-7 cockpit display and legacy displays product lines, which that whole group has been performing extremely well for us. As a result in May 24, we completed a second transaction with Honeywell International under which we acquired additional licenses and certain assets to further enhance the manufacturing of these new products, including screens for a military variant of the Boeing 737 NG, and triple seven cockpit displays and legacy displays product lines.

Speaker Change: I'm exposure to commercial OE. Are you seeing any slowdown in orders on the OE side because of the slower than expected production ramps both at Airbus and Boeing, or do continue to ship at the higher target rates that they're just taking inventory?

Speaker Change: You know, we've definitely seen a reduction off of forecast due to their build rates. You know, there's no question airbus is doing, I think, better than Boeing in that area.

Speaker Change: but yes, definitely on the commercial OE production, things are softer.

Speaker Change: then expected that of course has been offset by our strengths in the defense side.

Speaker Change: and we expect that strength to continue into 2025, 2025, and after based on our conversations with our customers and what they want there.

Speaker Change: Okay, and then here's a question. Larry, I thought I would ask you this question, but anybody please jump in.

Larry Mendelson: You continue to be a positive, you just did another deal. How would you characterize the M&A pipeline as it stands today, maybe relative to the prior year or so? And is there any change in behavior from private equity folks who are out there with properties to sell?

Lawrence Mendelssohn: Last week we announced that a flight support group acquired the aerial delivery and decent divisions of Capewell aerial systems, purchase price of this acquisition, this painting cash, principally using proceeds from our revolving credit facility, and we expect this acquisition to be a freedom to our earnings within the first year following the acquisition.

Larry Mendelson: Rob, this is Eric, I'll take that just for a moment. Of course, the year ago, we were largely focused on one course, our largest deal in the history of the company over $2 billion, and that consumed a tremendous amount of capital as well as efforts.

Rob: But I can tell you that our pipeline today remains incredibly robust. We have a lot of projects in the work. Our acquisitions teams are nonstop running around the country. I think we've...

Eric Mendelson: At this time, I would like to introduce Eric Mendelson, co-president of Heicos, Heico and president of Heicos flight support group, and he will discuss the third quarter results of the flight support group. Thank you very much. The flight support groups net sales increased 68% to a record 681.6 million in the third quarter of fiscal 24, up from 405 million in the third quarter of fiscal 23. The net sales increase reflects the impact from our fiscal 23 and 24 acquisitions and strong 15% organic growth.

Rob: worked very hard to differentiate ourselves as the buyer choice.

Rob: and we'll keep our fingers crossed that some of these will come to fruition. But there's no question that in conversations. And I don't want to call out individual.

Rob: Businesses, because they have their own respective sellers and reasons for having dumped out with us.

Rob: but I can tell you that on all of our recent acquisitions, I think PICO's reputation has been key to getting all of those deals done and has made us a particularly attractive counterparty.

Rob: for our sellers and partners. And the pipeline remains very, very strong.

Eric Mendelson: The organic net sales growth mainly reflects increased demand across all of our product lines. As we continue to experience excellent organic growth within the FSG, we have also been highly successful in supplemental supplementing growth through acquisitions. Last week we acquired Capewell, a Connecticut-based leading provider of proprietary aircraft cockpit, emergency egress, and aerial delivery products for both the commercial aerospace and defense industry. I am very impressed with their manufacturing process and strict adherence to high reliability and quality products, which help ensure pilot and troop safety worldwide.

Rob: Rob, I know you asked neither question, but Eric preempted me, so what he told you is accurate, the pipeline is very full.

Rob: and we are looking at actually too many acquisitions right now, it's taking full time of a staff.

Eric Mendelson: Last week we acquired Capewell, a Connecticut-based leading provider of proprietary aircraft cockpit, emergency egress, and aerial delivery products for both the commercial aerospace and defense industry. I am very impressed with their manufacturing process and strict adherence to high reliability and quality products, which help ensure pilot and troop safety worldwide. They also have an excellent staff of people who will fit extremely well within the Heico family.

Rob: and I think it's very active. We're looking more for non-private equity deals, but that's more in our.

Rob: is the best interest. Although we do see some private equity, the problem is they're priced very high and when we try to compete, normally we can't compete because of the price.

Eric Mendelson: They also have an excellent staff of people who will fit extremely well within the Heico family. The WENCORE operations continue to exceed our expectations, and we are convinced this was an excellent investment for Heico. WENCORE's entrepreneurial culture and a record of producing high quality products continues to produce wins in the marketplace. Our customers continue to find great value in our larger aftermarket product offerings for their aerospace parts and component repair and overall needs. We continue to operate WENCORE as a standalone business operation. However, we have made very good progress in working together and serving our customers in a combined seamless fashion.

Rob: but we have enough private equity deals really to fill all that we need.

Eric Mendelson: The WENCORE operations continue to exceed our expectations, and we are convinced this was an excellent investment for Heico. WENCORE's entrepreneurial culture and a record of producing high quality products continues to produce wins in the marketplace. Our customers continue to find great value in our larger aftermarket product offerings for their aerospace parts and component repair and overall needs. We continue to operate WENCORE as a standalone business operation. However, we have made very good progress in working together and serving our customers in a combined seamless fashion.

Rob: So it's for us it's a virus market right now.

Rob: Got it. Got it. And just quickly Carlos, if I could ask you with the blended organic growth rate, wasn't the quarter of it. Thank you.

Speaker Change: You're talking about for the company as a whole.

Carlos: Yeah, so when you factor it all in, yeah. Yeah, so all in, it was a tick over 7% organic growth for the whole company.

Speaker Change: Okay, excellent. Thank you all.

Speaker Change: Thanks for all. Thank you, Rob. Thank you.

Eric Mendelson: Some examples of how we are now working together include 1. Utilization of all Heiko and Wincore PMAs in DERs at all of our repair stations, 2. Commercial and defense aftermarket sales cooperation, 3. Wincore e-commerce platform lists all Heiko non-competitive PMAs, 4. Wincore is utilizing Heiko's manufacturing base in particular our specialty products in electronic technologies group to quote new products, 5. Engineering and regulatory cooperation, 6. Sharing besting class vendors, and 7. Driving various back office synergies such as payroll and export compliance that will help offset the cost of additional regulatory compliance such as Sarbanes Oxley and Heiko's FAA ODA program.

Speaker Change: We'll take our next question from Bert Subin with Steephel.

Speaker Change: Hey, good morning and thank you for the questions.

Burton: Good morning Burton.

Speaker Change: Maybe Eric just to start with you on the F.S.G. side, you know, I think mentioned sort of accelerating growth or gain at growth of 15%.

Speaker Change: extremely impressive.

Speaker Change: Last quarter, you had talked about the aftermarket replacement part side being a belief 21% growth and you called out about a quarter of that being price.

Speaker Change: with the discount relative to OEM being close to the widest you've ever seen it. Some curious how did that change in the fiscal third quarter was pricing, you know, increases an element of that growth, or does it continue to be more of a volume story?

hi-bird: Yeah, I'm hi-bird.

Speaker Change: So, the short answer, it's more of a volume story. I think last, so this quarter, it was 17% for the parts business.

Speaker Change: and last quarter I think it was 21 as you mentioned. Most of that is volume. Some of it is price, but I would say it's definitely mostly on the volume side. We've been very...

Eric Mendelson: The fight support groups operating income increased 72% to a record 153.6 million in the third quarter of fiscal 24, up from 89.2 million in the third quarter of fiscal 23. The operating income increase principally reflects the previously mentioned net sales growth and then improved gross profit margin, partially offset by an increase in intangible asset amortization expense. The improved gross profit margin principally reflects higher net sales within our aftermarket replacement parts and repair and overhaul parts and services product lines.

Speaker Change: Firm about passing along our pricing creases to our customers and we've got to make sure that our cost have gone up and whether that's labor or special processes material, purchase product.

Speaker Change: Whatever it is, we've got to make sure that we get that passed along. So definitely the best majority of that is...

Speaker Change: and then much lesser extent would be the price.

Eric Mendelson: Eric, do you think Ford for FISTER for, I guess, just for the aftermarket replacement parts business?

Speaker Change: I know it was brought up earlier on the airline side, just in trimming to pass the lower yields, it doesn't sound like that's had any impact yet.

Eric Mendelson: The fight support groups operating margin increased to 22.5% in the third quarter of fiscal 24, up from 22.0% in the third quarter of fiscal 23. Given that acquisition-related intangible amortization expense consumed approximately 270 basis points of our operating margin in the third quarter of fiscal 24, the FSG's cash margin before amortization or EBIT was approximately 25.2%, which is excellent in absolute terms and is 180 basis points higher than the comparable fight support group cash margin of 23.4% in the third quarter of fiscal 23. I am extremely pleased with these results. The increased operating margin principally reflects the previously mentioned improved gross profit margin as well as lower acquisition costs, partially offset by the previously mentioned higher intangible asset amortization expense.

Speaker Change: Do you think there's an opportunity to gain meaningful share if we go into a little bit of a slow down just because it opens up?

Speaker Change: or I guess it makes the portfolio more attractive to customers that may be bought PMA parts in sort of a lower percentage, or do you think that becomes sort of the element where, you know, pricing may be balanced as we're falling, you know, just curious how you're thinking about maybe the next several quarters if things do slow down.

Speaker Change: Again, we haven't seen signs of any slowdown to date as a matter of fact quite the contrary.

Speaker Change: sort of surprisingly to the contrary. And with regard to normally when there is a slowdown, obviously volumes drop and that is when we pick up additional market share. That's when customers realize that they've got to take advantage of our additional cost savings, parts and repairs. And we pick up market share at that point and then of course when

Eric Mendelson: I am extremely pleased with these results. The increased operating margin principally reflects the previously mentioned improved gross profit margin as well as lower acquisition costs, partially offset by the previously mentioned higher intangible asset amortization expense.

Speaker Change: the economy recovers, we recover even stronger than most because we've picked up market share.

Speaker Change: The customers are very...

Speaker Change: I think very excited about the HACAL product line. They want to have competition, they're demanding competition and HACAL provides.

Victor Mendelson: Now I would like to introduce Victor Mendelsson, co-president of HICO, and president of HICO's electronic technologies group to discuss the third quarter result of the electronic technologies group. Victor, Thank you, Eric. The electronic technologies groups net sales were $322.1 million in the third quarter of fiscal 24 as compared to $325.9 million in the third quarter of fiscal 23. The slight net sales decrease principally reflects lower other electronics and medical products, net sales, partially offset by increased defense space and aerospace products, net sales.

Speaker Change: is a very, very competition in that regard. So I think that we're going to do very well. And for sure, pick up market share, get additional parts in repairs designed in when that, if that occurs.

Victor Mendelson: Very helpful, and I just want last question for Victor.

Victor Mendelson: If we look at the ETG business over the last several quarters, you know, sort of bounced around from positive to negative on the organic side, sort of average to about zero percent.

Speaker Change: I think that business is meant to be sort of longer term, low to mid-single digit organic.

Speaker Change: I guess sort of a two-part question. One, I think earlier in the year you were expecting this more significant ramp in the back-ass and just curious what changed that outlook.

Victor Mendelson: This is in line with our expectations as we've commented on earnings, constants calls over the last few quarters and is consistent with inventory destocking its some customers. We continue to anticipate quarterly volatility in the ETG's defense net sales but the overall trend remains very positive. As expected, other electronic net sales were lower during the third quarter of fiscal 24 compared to the third quarter of fiscal 23. We believe these order trends in these markets have bottomed and we are seeing improved orders in some of our companies in these other markets.

Speaker Change: and then two as you go into FY25, is there a potential that grows sort of exceeds your longer term growth target, just as a function of recovering?

Speaker Change: Yeah, thank you, Bert. The good questions. I don't think...

Speaker Change: where we are, and so far in the back half of the year has really been a surprise to us. I think we tried to hint in the second quarter called that we thought...

Speaker Change: you know.

Speaker Change: for example, margins were higher in that period that we would look for an average over the course of the year. So it's not really too far out of line, maybe slightly. We're doing the budgets for fiscal 25, but when I look at our backlogs.

Victor Mendelson: These other markets typically equate to between a quarter and 30% of our sales. I continue to expect an overall return to growth in these end markets and businesses during the first half of fiscal 25. The ETG's record backlog in strong overall orders support our optimism and as the non-A and D markets improve, we expect a healthy tailwind into our next fiscal year. Orders for commercial aviation and defense products have been very robust and we are very pleased with our businesses performance, like at Accelium, which continues to be a strong acquisition meeting our performance expectations, including growing its profit margins.

Speaker Change: and I look at our order rate.

Speaker Change: It feels to me, as though we would have a stronger growth rate in fiscal 25, again, it's a little premature for me to say that with certainty, because our companies do their budgets now, and submit them in early October, so I'm waiting on those, but right now that's how it feels to me, yes.

Speaker Change: Thank you very much.

Speaker Change: We'll take our next question from Larry Solof with CJS Securities.

Victor Mendelson: Further, our order book and quotation activity for fiscal 26 is building nicely and I did mean to say fiscal 26 in addition to 25 of course, which augments our optimism for later periods as well. The electronic technologies groups operating margin improved 23.5% in the third quarter of fiscal 24 up from 22.8% in the third quarter of fiscal 23. I also note that before acquisition related intangibles amortization expenses, our operating margin was above 27% as those intangibles amortization expenses consume around 400 basis points of our margin.

Speaker Change: Good morning Larry. Thanks so much. Good morning everybody. Thanks for taking the questions and congrats on a really impressive growth and even Victor sounds like some good bookings growth for your side of the business.

Speaker Change: looks like we'll be having the pulses and we'll give a couple of quarters of coming. I give a question to Eric so you just a couple, thank you for some of that detail on the lankour. So it sounds like you are certainly getting a look like some revenue synergies and stuff combining a lot of.

Speaker Change: Comments Services and whatnot. I'm just curious, like, I don't know if you could break this out, but as you're a gannick, growth at one core, you know, kept up or even exceeded sort of the overall growth in the company of the FSTG of the last few quarters.

Speaker Change: I can see it's very consistent with FSTG. I mean, we look at the various wind core businesses.

Victor Mendelson: And that's how we judge our businesses as that most closely correlates to our catch. So when we look at how our businesses are doing on an operating basis, we are very pleased with the overall margins and their continued improvement. The operating margin increased principally reflects the previously mentioned improved gross profit margin partially offset by a lower level of SGNA efficiencies.

Speaker Change: and their organic growth is very consistent. I mean, some are, you know, there can be little anomalies here there, but in general they're doing very well in consistent with the legacy high-co businesses.

Speaker Change: and has the overall, obviously, the PMA parts offer has increased one plus one, certainly equals two, but has it increased even more, and has increased the overall offering of parts of that help grow in the last few quarters.

Victor Mendelson: Turn the call back over to Larry Mendelssoh. Thank you, Victor.

Lawrence Mendelssohn: Now for the outlook. As we look ahead to the remainder of fiscal 24, we remain optimistic about achieving net sales growth for both FSG and ETG. This growth is expected to be largely fueled by the contributions from our fiscal 23 and 24 acquisitions, alone with sustained demand for the majority of our products. Additionally, we are committed to ongoing product and service innovation, further market penetration, and maintaining our financial strength and flexibility.

Speaker Change: Yes, it has, and the overall offering has grown, and we've really seen the advantages of that and frankly, the customer enthusiasm around it.

Speaker Change: I'm just a question. Well, it sounds like the the K-pop position I sort of talk in anymore color that. It looks like I guess it's going to be in specialty products. So a little more niche higher margin stuff, maybe a little bit more.

Speaker Change: The End of Episode 2

Speaker Change: from Sharpie Sales, bigger quarter sometimes, I don't know how to look at that kind of work.

Speaker Change: It's a terrific business, and they basically have two main product lines. One is the commercial and nootary, I'm sorry, the commercial and nootary aerial descent business. So basically, when you are the cockpit egress business, you need to have basically a way of a cockpit in case the cockpit door is blocked or also cargo aircraft or a tanker's need.

Lawrence Mendelssohn: In conclusion, I want to, again, express my gratitude to the exceptional team members for their unwavering support and dedication to Heiko. Our strategy of building a diversified portfolio of outstanding businesses continues to deliver positive outcomes for our shareholders. Our key markets are very strong, and in fiscal 24 is shaping up to be another successful year. Thank you as shareholders for your continued trust, and as I mentioned before, I remain very optimistic about the future for Heiko.

Speaker Change: He graduated from the aircraft in the event of a problem and they have a very...

Speaker Change: is sophisticated.

Speaker Change: Well, time tested or appreciated product.

Speaker Change: which is in a number of commercial end military aircraft, which is really key and really the only way to get people out of the aircraft in the event they need to escape and the standard slides.

Samara: And now we'll open the floor to questions. Thank you. If you would like to ask a question, please signaled by pressing star 1 on your telephone keypad. If you are using a speaker phone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star 1 to ask a question, and we'll pause for just a moment to allow everyone an opportunity to signal for questions.

Operator: And now we'll open the floor to questions. Thank you. If you would like to ask a question, please signaled by pressing star 1 on your telephone keypad. If you are using a speaker phone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star 1 to ask a question, and we'll pause for just a moment to allow everyone an opportunity to signal for questions.

Speaker Change: are either inactive or don't exist on certain types of aircraft. So that's part of their business. And then the other part of their business is the aerial percent piece.

Speaker Change: where, whether you're parachuting out of an airplane or if they're dropping.

Speaker Change: Thanks for various equipment that I've seen on 30s or C-17s or whatever it is.

Robert Spingarn: We'll take our first question from Robert Spingarn with Melius Research. Well, good morning, and very nice quarter. Thank you very much, Rob. Good morning to you. Thank you. A couple.

Speaker Change: you've got fairly sophisticated pair of shoes.

Speaker Change: that attached to it in our various attachment mechanisms.

Speaker Change: Aerial Drop Mechanisms, which are really critical. So we think that this is a great business. It's really appreciated by its customers and, you know, frankly, it's the pioneer in this business. And since the 1940s was the original.

Robert Spingarn: I thought I'd start with the end markets.

Eric Mendelson: I thought I'd start with the end markets. Eric, FSG's organic growth rate accelerated relative to the prior two quarters. And I was wondering, does this reflect the maturing integration that you just talked about between Heiko and Wencourt? Or is this simply a function of the market, maybe demand strengthening in the end market and aftermarket? Yeah, I think that's a great question, Rob, and I've spent a lot of time in business reviews and with our sales folks in particular over the last month going over a lot of the details.

Eric Mendelson: Eric, FSG's organic growth rate accelerated relative to the prior two quarters.

Eric Mendelson: And I was wondering, does this reflect the maturing integration that you just talked about between Heiko and Wencourt? Or is this simply a function of the market, maybe demand strengthening in the end market and aftermarket? Yeah, I think that's a great question, Rob, and I've spent a lot of time in business reviews and with our sales folks in particular over the last month going over a lot of the details. There's no question that the market remains strong, but I do think the reason why the incredible 17% growth rate was so outstanding is because of really two factors.

Speaker Change: Company that designed the device which permit paratroopers to jump out of airplanes and to detach. Once they hit the ground and not get dragged as a result of the parachute.

Speaker Change: and so that's a very strong business. It's a very meachy business and that's why we thought it fit very well in our specialty products.

Eric Mendelson: There's no question that the market remains strong, but I do think the reason why the incredible 17% growth rate was so outstanding is because of really two factors. One, we continue to win in the marketplace. And, you know, Heiko is an accumulation or a combination of individual businesses working as hard as they can, planning years in advance, developing these products, having them on the shelf and being able to hit the demand and get them sold when the market needs them.

Speaker Change: and of course our specialty product says a lot of connection to the overall, you know, to the other parts of the white support so I think it's a very good fit.

Speaker Change: We're very excited about it.

Eric Mendelson: One, we continue to win in the marketplace. And, you know, Heiko is an accumulation or a combination of individual businesses working as hard as they can, planning years in advance, developing these products, having them on the shelf and being able to hit the demand and get them sold when the market needs them. So I think that's number one. Really, everybody's sort of, if you will, all the unsung heroes who are working their rear ends off every day to make this happen.

Carl: I guess this last question may pass for Carl. It's just on the margin, you mentioned.

Speaker Change: is starting to lead on the FSC and EETG up to 25% and 27% on the cast operating margin. Perhaps not so much in the next quarter or two, but when you see those margins over the next three to five years, I mean, can they continue to tick up on the cast side? You look out.

Eric Mendelson: So I think that's number one. Really, everybody's sort of, if you will, all the unsung heroes who are working their rear ends off every day to make this happen. So that's probably the first reason. The second would definitely be due to the addition of Wencourt and the broadening of our product line, I think in speaking with our customers, we are viewed as a much more complete supplier. I mean Heiko today has transitioned tremendously over the last many decades.

Speaker Change: So the answer to your question is, as we continue to grow the volume of the business that we expect to look at, we got incremental margin gains consistent with our history, you know, as the base of the business grows.

Eric Mendelson: So that's probably the first reason. The second would definitely be due to the addition of Wencourt and the broadening of our product line, I think in speaking with our customers, we are viewed as a much more complete supplier. I mean Heiko today has transitioned tremendously over the last many decades. And I think our customers are very confident in purchasing additional products from us, whether it's parts, distribution, PMA, repair. And I think we're growing our market share.

Speaker Change: Sump.

Speaker Change: The amount of overhead need to support is relative to that growth, so it's a little lower. I expect we'll get that if you look back.

Speaker Change: I've quoted this before, if you look back a decade and look at the margin gains, you know, over that, that's kind of what I would expect going forward. Once we settle into our footprint here in the FSG and E.T.G. And I do think, you know, you're talking about an E.B.A. margin, so it's...

Eric Mendelson: And I think our customers are very confident in purchasing additional products from us, whether it's parts, distribution, PMA, repair. And I think we're growing our market share. So it's really, I think, yes, a strong market, but more, I think, really focusing on the detail by our businesses and the broadening of the product line through Wencourt and the 737 and Triple 7 display unit acquisition.

Eric Mendelson: So it's really, I think, yes, a strong market, but more, I think, really focusing on the detail by our businesses and the broadening of the product line through Wencourt and the 737 and Triple 7 display unit acquisition.

Speaker Change: is pretty elevated. We were happy with it this quarter and I think that as we move forward, that should continue to stabilize any counter-primance.

Speaker Change: All right, excellent. Thanks everybody.

Speaker Change: Welcome, thanks!

Speaker Change: We'll take our next question from Peter Armit with Baird.

Eric Mendelson: Okay, and then, notwithstanding the strong growth, you know, there have been some airlines out there talking about over capacity that's been a bit of a theme here. Are you seeing any evidence of that in the order patterns so far? No, we really don't actually, and as a matter of fact, the number of airlines had sort of trimmed back their purchases. They, if you will, in hindsight, I think over ordered a bit.

Peter Armit: Good, thanks for the morning Larry, Eric, Victor, Carlos.

Peter Armit: Nice, nice, nice results.

Peter Armit: Victor, can you talk a little bit about, you know, you talked about some of the booking rates and sort of the competence and, you know, seeing ETG growth thinking about next year, but just, you know, maybe some of the end markets that we're seeing is, is defense, I assume it's almost 50% of your segments.

Eric Mendelson: In 2023, you know, took more than they needed in 2023, so we do have anecdotal, you know, evidence of certain customers cutting back this year, but that was really offset by strengths that other customers. So, I think we, we continue to do very well. And that really, you know, that gets to the sort of the beauty of the Heiko model and that we've got all these individual business units. It's who have to control their own destiny.

Speaker Change: is that growing, you know, mid-single digits and it's just as other areas that are seeing some softness or maybe just a little more color.

Peter Armit: So Peter...

Peter Armit: the

Peter Armit: the defense.

Speaker Change: Part of the business and commercial aviation really have been extremely strong experiencing double-digit growth.

Eric Mendelson: And if they're short in one area, they figure out how to make it up in another area. And this doesn't roll up to my desk after the fact. And instead they're doing this real time. So, in summary, no, I mean, the market for us remains quite strong.

Eric Mendelson: Okay.

Peter Armit: and again, that's where some of our longer-term bookings really come on the defense side and seeing some of those fill out beyond 25.

Peter Armit: as well as some of the quote-activity in the order indications.

Peter Armit: again.

Peter Armit: 25 and beyond.

Peter Armit: Right now, I feel like Defense is a good leader for us, and commercial aviation has really been phenomenal.

Eric Mendelson: And then just on the OE side, both you and Victor have some exposure to commercial OE. Are you seeing any slowdown and orders on the OE side because of the slower than expected production ramps, both at Airbus and Boeing, or do you continue to ship at the higher targeted rates that they're just taking inventory? Yeah, we've definitely seen a reduction off of forecasts due to their build rates. You know, there's no question Airbus is doing, I think, better than Boeing in that area.

Eric Mendelson: Okay. And then just on the OE side, both you and Victor have some exposure to commercial OE. Are you seeing any slowdown and orders on the OE side because of the slower than expected production ramps, both at Airbus and Boeing, or do you continue to ship at the higher targeted rates that they're just taking inventory? Yeah, we've definitely seen a reduction off of forecasts due to their build rates. You know, there's no question Airbus is doing, I think, better than Boeing in that area.

Peter Armit: So when I take that together, I look at the other markets.

Peter Armit: which are down, you know, consistent with, I think, what other people are seeing in these kinds of markets.

Peter Armit: and it looks like those order rates are bottoming out. It appears to us that our customers have kind of used up the excess inventory and orders are coming in. If you add a sort of six month lead time on that, it gets us into...

Peter Armit: and that's why I say I feel like there will be a very nice tailwind from that next year. Of course I can't be certain that, but that's just how it feels right now.

Eric Mendelson: But yes, definitely on the commercial OE production, things are softer than expected. That of course has been offset by our strengths in the defense side. And we expect that strength to continue into 2025, 2026, and after based on our conversations with our customers and what they want there.

Speaker Change: and he's really impacting him.

Eric Mendelson: Okay.

Speaker Change: and Victor Mendelson, Victor Mendelson.

Speaker Change: You're not wrong or what you said about 50% of the segment, but right now we're tracking around 40%. So we still have, have mentioned in the past, once the mix sort of settles down.

Eric Mendelson: And then here's a question.

Speaker Change: I do expect our defense to become closer to the 50% number over time right now. We're still a little behind on the total revenues in the segment being only around 40% for defense this quarter.

Eric Mendelson: Okay. And then here's a question. Larry, I thought I would ask you this question. But anybody please jump in. You continue to be inquisitive. You just did another deal. Well, how would you characterize the M&A pipeline as it stands today, maybe relative to the prior year or so? And is there any change in behavior from private equity folks who are out there with properties to sell? Yeah, Rob, this is Eric. I'll take that just for a moment.

Eric Mendelson: Larry, I thought I would ask you this question. But anybody please jump in. You continue to be inquisitive. You just did another deal. Well, how would you characterize the M&A pipeline as it stands today, maybe relative to the prior year or so? And is there any change in behavior from private equity folks who are out there with properties to sell? Yeah, Rob, this is Eric. I'll take that just for a moment.

Speaker Change: Okay, that's helpful. And then just Carl's major stickin with you on the leverage, it's come down exactly where you guys kind of thought it would do 2.1 turns, you know, how are you thinking about, you know, just given that the M&A pipeline.

Speaker Change: is full, but your ability to want to still deliver any update of thoughts on where you're taking the leverage.

Eric Mendelson: Of course, a year ago we were largely focused on one course, our largest deal in the history of the company over $2 billion. And that consumed a tremendous amount of capital as well as effort. But I can tell you that our pipeline today remains incredibly robust. We have a lot of projects in the work, our acquisitions teams are non-stop running around the country. I think we've worked very hard to differentiate ourselves as the buyer of choice.

Speaker Change: Well, I think, you know, by nature, we're in a positive company and we set out on an aggressive...

Speaker Change: Time-table to pay down some of the debt that we had and we've done that. I think the opportunities are a bound. As long as we can keep our leverage.

Speaker Change: Candidally under three.

Speaker Change: There's opportunities for us and I think that the goal for us is to find very profitable companies that they don't disrupt that leverage.

Speaker Change: You know, the ones that have real high-Eba-Dah.

Eric Mendelson: And we'll keep our fingers crossed that some of these will come to fruition. But there's no question that in conversations, and I don't want to call out individual businesses because they have their own respected sellers and reasons for having dealt with us. But I can tell you that on all of our recent acquisitions, I think Haiko's reputation has been key to getting all of those deals done and has made us a particularly attractive counterparty for our sellers and partners.

Speaker Change: which has been our history, right? I mean we like high margin businesses. So the more acquisitions we do with the higher margin, the less impact it has in that leverage and that's where I'm steering things when we talk internally about these deals.

Speaker Change: I'll leave it there. Thanks guys.

Speaker Change: We'll take our next question from David Strauss with Park Lays.

David Strauss: Morning David. Thank you. Thank you for taking my question.

David Strauss: One desk about working capital, you know, last year you had a fairly big inventory build this year, a fairly big inventory build. How are you thinking about potentially, you know, slower growth or working capital, or maybe working capital just coming down on absolute basis from here?

Eric Mendelson: And the pipeline remains very, very... Rob, I know you, this is Larry, I know you asked me the question, but Eric preempted me. So what he told you is accurate. The pipeline is very full and we are looking at actually too many acquisitions right now. It's taking full time of a step and I think it's very active. We're looking more for non-private equity deals. That's more in our interest. Although we do see some private equity, the problem is their price is very high and when we try to compete normally we can't compete because of the pricing. But we have enough non-private equity deals really to fill all that we need. So it's for us it's a buyer's market right now. Got it.

Eric Mendelson: Hey, David, this is Eric. I'll start out with sort of the big picture and then Carlos, to get into the specifics on the financial. You know, Hickel has always been focused on customer service and making sure that we capture all of the incremental sales that we can capture.

Carlos: and if you look at coming out of COVID.

Speaker Change: Heiko recovered much quicker than most, and as a result of not cutting our people, not trimming our inventories too much, and bottom line, we were able to support the market when others weren't, and that's really been a huge Heiko advantage.

Speaker Change: So, I can tell you from an operational perspective, Victor and I are very very focused on all of our business units reviewing.

Victor Mendelson: and working capital understanding specifically how the inventory or the receivables have increased. Obviously, receivables that's up due to the huge increase in sales.

Victor Mendelson: But with regard to inventory, our businesses have been...

Carlos Macau: And just quickly Carlos, if I could ask you what the blended organic growth rate was in the quarter. Thank you. You're talking about for the company as a whole? Yeah, someone you factored all in. Yeah. So all in it was a tick over 7% organic growth for the whole company. Okay. Excellent. Thank you all. Thanks, Rob. Thank you, Rob. Thank you.

Carlos Macau: Got it. And just quickly Carlos, if I could ask you what the blended organic growth rate was in the quarter. Thank you. You're talking about for the company as a whole? Yeah, someone you factored all in. Yeah. So all in it was a tick over 7% organic growth for the whole company. Okay. Excellent.

Speaker Change: really outstanding in terms of having the correct inventory on the shelf. There are a lot of companies where their inventory blows up and they've got the wrong stuff on the shelf and they can't sell it and then people find out after the fact that it's a problem.

Heiko: Heiko has always been very, very careful not to do that, and as a result, we have very, very robust inventory reserve policies to make sure that we're being very proactive.

Robert Spingarn: Thank you all. Thanks, Rob. Thank you, Rob. Thank you.

Bert Subin: We'll take our next question from Bert Souben with Steve. Hey, good morning and thank you for the questions.

Bert Subin: We'll take our next question from Bert Souben with Steve. Hey, good morning and thank you for the questions. Good morning, Bert.

Heiko: and we make sure that we have the right inventory. So I think that there's no question that there is a big internal focus on inventory. We want to slow the growth.

Bert Subin: Good morning, Bert.

Heiko: but it is really key to our business and frankly, you know, when you look at that.

Eric Mendelson: Maybe Eric just to start with you on the FSG side. You know, I think mentioned sort of accelerating growth organic growth of 15% extremely impressive. Last quarter you had talked about the after market replacement part side being I believe 21% growth and you called out about a quarter of that being price. With the discount relative to OEM being close to the widest you've ever seen it. So I'm curious, how did that change in the fiscal third quarter was pricing, you know, increases an element of that growth or does it continue to be more of a volume story?

Heiko: 17% organic growth that we had in the aftermarket business. I mean, that was really outstanding and that can only be accomplished through increased inventories. But Carlos will get into the specifics for you.

Carlos: I don't know how much more it could add to that. I would say that the rate of increase in inventory span has come down relative to the growth of the business. I mean, our sales are...

Carlos: for the quarter up 37% comparatively and are used or inventory spends not ramping at that pace. I'm happy with that. I think what I mentioned earlier in the year David wouldn't have had.

Eric Mendelson: Yeah, hi, Bert. So the short answer, it's more of a volume story. I think last, so this quarter it was 17% for the parts and the parts business. And last quarter I think it was 21 as you mentioned. Most of that is volume. Some of it is price, but I would say it's definitely mostly mostly on the volume side. We've been very firm about passing along our price increases to our customers and we've got to make sure as our costs have gone up and you know whether that's labor or special processes, material, purchase product, whatever it is, we've got to make sure that we get that passed along.

Carlos: We had a fair amount of orders outstanding on firm commitment inventory that some of our subsidiaries had made two years ago, just because of lead times. And so we made good on those. We're not the type of company that...

Carlos: Just, you know, disrupts our vendor base or does that things are vendor base to take advantage of a moment in time. Going to be partners with our vendors and make sure that we're good to them as they expect them to be good at.

Carlos: The rate of those firm orders has come down, we're now sort of beyond that, and I do expect use of working capital, particularly the inventory to come down a little bit.

Carlos: but it will continue to grow a little bit as the business grows as Eric pointed out.

Speaker Change #100: I wasn't displeased this quarter with the working capital use we expected it and again the rate of change in that inventory spend is down considerably compared to the first half of the year. And also they've just to add one other little anecdote of course the purchase of the...

Eric Mendelson: So definitely the vast majority of that is.., of Value, and then much lesser extent would be the price. Eric, as you think forward for FFSTR, I guess just for the aftermarket, replace from parts business, you know, I know it was brought up earlier on the airline side, you're seeing trimming capacity, lower yields. It doesn't sound like that's had any impact yet. Do you think there's an opportunity to gain meaningful share if we go into a little bit of a slow down just because it opens up or I guess it makes the portfolio more attractive to customers that maybe bought PMA parts in sort of a lower percentage or do you think that becomes sort of the element where, you know, pricing maybe balances with volume, just curious how you're thinking about maybe the next several quarters if things do slow down.

Speaker Change #100: 737 NGA in Tribal 7 Display Unit Business was the purchase of a product line and as a result, a good chunk of the inventory increase was due to that. So that really is an acquisition, it's a new business.

Eric Mendelson: Eric, as you think forward for FFSTR, I guess just for the aftermarket, replace from parts business, you know, I know it was brought up earlier on the airline side, you're seeing trimming capacity, lower yields. It doesn't sound like that's had any impact yet. Do you think there's an opportunity to gain meaningful share if we go into a little bit of a slow down just because it opens up or I guess it makes the portfolio more attractive to customers that maybe bought PMA parts in sort of a lower percentage or do you think that becomes sort of the element where, you know, pricing maybe balances with volume, just curious how you're thinking about maybe the next several quarters if things do slow down.

Speaker Change #100: It's all good inventory, but that obviously shows up as inventory. So you have to sort of take that into account. So when that's stripped out, the increase is much smaller.

Speaker Change #101: Great, great thanks for the detailed answer. Other questions I had on SSG margins, I know you talked about the year-over-year improvement, but you know, margins did drop, you know,

Eric Mendelson: Yeah, again, we haven't seen signs of any slow down to date, as a matter of fact, quite the contrary, sort of surprisingly to the contrary. And with regard to normally when there is a slow down, obviously volumes drop, and that is when we pick up additional market share. That's when customers realize that they've got to take advantage of our additional cost savings, and we pick up market share at that point, and of course when the economy recovers, we recover even stronger than most because we've picked up market share.

Speaker Change #102: you know, Gap margins did drop a little bit sequentially what what drove that 50 basis point dropped sequentially was that was that mix or something else.

Speaker Change #102: There's, uh, I think David's the, um...

Speaker Change #103: What we've told folks, there's nothing unusual about what's happening in the emergency quenchily. I think what we've told folks is that we expect the segment to run between.

Speaker Change #103: 22%

Speaker Change #104: Maybe it's size 23 as it has been in the last quarter. I don't think design usual going on. It's ebbs and flows. You have a little shift in mix. As Eric pointed out, some of the commercial business was down in specialty products.

Eric Mendelson: The customers are very, I think, very excited about the HIKO product line. They want to have competition, they're demanding competition, and HIKO provides, you know, very fair competition in that regard. So I think that we're going to do very well, and for short pick up market share, get additional parts and repairs designed in when that, if that occurs.

Eric Mendelson: The parts business is doing very well, that is March and helpful.

Eric Mendelson: Very helpful.

Eric Mendelson: Repair Business is growing also. That's a little bit less, uh, a creative than the parts business. So you're going to have puts in takes as we, as we get the business, um,

Speaker Change #105: to sort of settle into the vertical footprints of the segments. So I wouldn't look, there's no one times or odd things going on in there.

Victor Mendelson: And just one last question for Victor. Victor, if we look at the ETG business over the last several quarters, you know, sort of bounced around from positives and negative on the organic side, sort of averaged about zero percent. I think that business is meant to be sort of longer term load amid single digit organic.

David Strauss: but David is there, also the way that I look at it from an operating perspective is.

David Strauss: A year ago, our EBITDA margin, or what we call the Flight Support Group, cash margin.

David Strauss: in the third quarter was 23.4% this year.

David Strauss: despite the acquisition of Blancor, which was at a lower cash margin. We've been able to increase the cash margin out of 180 basis points to 25.2%.

Victor Mendelson: I guess sort of a two part question. One, I think earlier in the year, you were expecting this more significant ramp in the back half, and just curious what changed that outlook. And then two, as you go into FY25, is there a potential that grows sort of exceeds your longer term growth target just as a function of recovering? Yeah, thank you, Bert. They're good questions. I don't think where we are, and so far in the back half of the year, has really been a surprise to us.

David Strauss: So I think those numbers are really outstanding, and this as Carlos says they just bounce around. I mean, that's why, you know, we say it's going to be within a certain range, but that's just standard noise.

Victor Mendelson: Yeah, thank you, Bert. They're good questions. I don't think where we are, and so far in the back half of the year, has really been a surprise to us. I think we tried to hint in the second quarter call that we thought, you know, for example, margins were higher in that period that we would look for an average over the course of the year. So it's not really too far out of line, maybe slightly.

Speaker Change #106: God, okay, thanks very much.

Victor Mendelson: I think we tried to hint in the second quarter call that we thought, you know, for example, margins were higher in that period that we would look for an average over the course of the year. So it's not really too far out of line, maybe slightly. We're doing the budgets for fiscal 25, but when I look at our backlogs and I look at our order rate, it feels to me as though we would have a stronger growth rate in fiscal 25.

Speaker Change #107: I'll take our next question from Pete Skibicki with a Lampic Global.

Pete Skibicki: Good morning, guys.

Pete Skibicki: I guess to start with Eric, last quarter you guys talked about the supply chain, negatively impacting the repair business, and I think maybe it sounds like it did a bit this quarter as well, just because it sounds like parts kind of drove the business.

Victor Mendelson: We're doing the budgets for fiscal 25, but when I look at our backlogs and I look at our order rate, it feels to me as though we would have a stronger growth rate in fiscal 25. Again, it's a little premature for me to say that with certainty because our companies do their budgets now and submit them in early October. So I'm waiting on those, but right now that's how it feels.

Speaker Change #109: So, can you talk through, kind of, you know, do you see any light at the tunnel there or maybe more specifically what's going on with this blight chain?

Victor Mendelson: and the ES. Thanks very much.

Victor Mendelson: Again, it's a little premature for me to say that with certainty because our companies do their budgets now and submit them in early October. So I'm waiting on those, but right now that's how it feels, and the ES. Thanks very much.

Eric Mendelson: Yeah, I would say we definitely have supply chain problems all over the business.

Speaker Change #110: It's our vendors are challenged. There's a huge demand out there. And, you know, getting we really got to be on top of your supply chain. You got to be on top of your vendors to make sure that you're prioritized and that they do is what they expect.

Larry Solow: Thank you. We'll take our next question from Larry Solow with CUJS Securities. Good morning, Larry. Thanks so much. Good good morning everybody. Thanks for taking the questions and congrats on really impressive growth and even Victor sounds like some good bookings growth for your side of business.

Victor Mendelson: Thank you.

Speaker Change #110: We still have a large backlog of past-do and, you know, frankly, that's driven by certain vendors or many vendors inability to produce support to their commitments.

Larry Solow: Looks like we'll be having a couple of quarters of coming.

Larry Solow: We'll take our next question from Larry Solow with CUJS Securities. Good morning, Larry. Thanks so much. Good good morning everybody. Thanks for taking the questions and congrats on really impressive growth and even Victor sounds like some good bookings growth for your side of business. Looks like we'll be having a couple of quarters of coming. I give a question to Eric for you. Just a couple. Thank you for some of that detail on the the WENCOR stuff.

Speaker Change #110: So that continues to be a struggle and...

Speaker Change #110: Frankly, I don't see a tremendous amount of improvement in the aviation supply chain, that basically demand is just...

Eric Mendelson: I give a question to Eric for you. Just a couple. Thank you for some of that detail on the the WENCOR stuff. So it sounds like you are certainly getting, it looks like some revenue synergies and stuff combining a lot of common services and whatnot. I'm just curious, I don't know if you could break this out, but has your organic growth at WENCOR kept up or even exceeded sort of the overall growth of the FSG over the last few quarters?

Larry Solow: So it sounds like you are certainly getting, it looks like some revenue synergies and stuff combining a lot of common services and whatnot. I'm just curious, I don't know if you could break this out, but has your organic growth at WENCOR kept up or even exceeded sort of the overall growth of the FSG over the last few quarters? I can see it's very consistent with FSG. I mean, we look at the various WENCOR businesses and their organic growth is very consistent.

Speaker Change #110: Outstripping supply, a lot of people retired, some businesses shut down, some businesses lost their, if you will, special processes, you know, despite.

Speaker Change #110: Everyone knowing that this is a high-tech industry, there are a lot of, I would say, less documented processes out there with suppliers.

Eric Mendelson: I can see it's very consistent with FSG. I mean, we look at the various WENCOR businesses and their organic growth is very consistent. I mean, some are, there can be little anomalies here or there, but in general they're doing very well and consistent with the legacy HIKO businesses. Has the overall, obviously the PMA parts offering has increased to 1 plus 1, certainly equals 2, but has it increased even more? Have you increased your overall offering apart? Does that help growth in the last few quarters? Yes it has. Then the overall offering has grown. And we've really seen the advantages of that and frankly the customer enthusiasm around it. Gotcha.

Speaker Change #110: When they didn't need to produce for a period of time, largely as a result of certain large OEMs, ripping out all their orders very quickly, those folks retired and a lot of these special processes.

Larry Solow: I mean, some are, there can be little anomalies here or there, but in general they're doing very well and consistent with the legacy HIKO businesses. Has the overall, obviously the PMA parts offering has increased to 1 plus 1, certainly equals 2, but has it increased even more? Have you increased your overall offering apart? Does that help growth in the last few quarters? Yes it has. Then the overall offering has grown. And we've really seen the advantages of that and frankly the customer enthusiasm around it.

Speaker Change #110: went away undocumented.

Speaker Change #110: and the industry has really struggled and I think this is why, if you look at the air framer, the engine manufacturers, they have really, really struggled.

Speaker Change #110: as a result of

HICO: their actions and basically slashing the supply chain the way they did. This is why HICO, we fought like hell to keep our people, to lay off as few as possible, to figure out how people would go to reduce schedules, because we knew that when the industry came back, we wanted to make sure that our most valuable asset was going to come back.

HICO: and I can tell you that there are companies out there who just went and cut 40 percent, 50 percent that their workforce is not on a temporary basis, but on a permanent basis.

Eric Mendelson: Just a question. Well, it sounds like the, the Cape Ball position, nice little tuck in. Any more color on that? It looks like I guess it's going to be in specialty products. So a little more nichi, higher margin stuff, maybe a little bit more, you know, some choppy sales, bigger quarters sometimes, right? Is that how to look at that? It's a terrific business and they basically have two main product lines. One is the commercial and military, I'm sorry, the commercial and military aerial descent business.

Larry Solow: Gotcha. Just a question. Well, it sounds like the, the Cape Ball position, nice little tuck in. Any more color on that? It looks like I guess it's going to be in specialty products. So a little more nichi, higher margin stuff, maybe a little bit more, you know, some choppy sales, bigger quarters sometimes, right? Is that how to look at that? It's a terrific business and they basically have two main product lines.

HICO: and as a result when they go back and they try to hire these folks, they can't get them back because some of her tired, some are pissed off, all sorts of reasons.

HICO: So, you know, it's a long road back and I think that's why the major manufacturers are having a big, big problem.

Eric Mendelson: So basically, when you are the cockpit egress business, you need to have basically a way out of a cockpit in case the cockpit door is blocked or also cargo aircraft or tankers need egress from the aircraft in the event of a problem and they have a very sophisticated well-timed, you know, appreciated product which is in a number of commercial and military aircraft which is really key and really the only way to get people out of the aircraft in the event they need to escape and the standard slides are either inactive or don't exist on certain types of aircraft. So that's part of their and then the other part of their business is the aerial descent piece where whether you're parachuting out of an airplane or if they're dropping tanks or various equipment out of C-130s or C-17s or whatever it is, you've got fairly sophisticated parachutes that attach to it and there are various attachment mechanisms and aerial drop mechanisms, which are really critical.

Larry Solow: One is the commercial and military, I'm sorry, the commercial and military aerial descent business. So basically, when you are the cockpit egress business, you need to have basically a way out of a cockpit in case the cockpit door is blocked or also cargo aircraft or tankers need egress from the aircraft in the event of a problem and they have a very sophisticated well-timed, you know, appreciated product which is in a number of commercial and military aircraft which is really key and really the only way to get people out of the aircraft in the event they need to escape and the standard slides are either inactive or don't exist on certain types of aircraft.

Speaker Change #111: Okay, so you think, just go forward. You expect a part-spinist to grow faster because that business you're less beholden to suppliers versus the repair business.

Speaker Change #112: Um, I wouldn't...

Speaker Change #112: Day.

Speaker Change #113: It's hard to say, which will grow faster, you know, we're pretty confident of our growth in both. You know, there's no question that when you ship individual parts.

Speaker Change #113: you are less impacted by a particular supplier's inability to supply because you can ship all the other parts that you have in stock. Whereas when you're overhauling a component, you know, line replaceable unit, LRU, you can only ship the component if you have all the parts.

Speaker Change #113: So if there's a bill in the material of 200 parts and you're missing one, you're not shipping that unit.

Speaker Change #113: So that creates complications and of course when you're building a complex assembly like an airplane or an engine that you have that problem in space.

Larry Solow: So that's part of their and then the other part of their business is the aerial descent piece where whether you're parachuting out of an airplane or if they're dropping tanks or various equipment out of C-130s or C-17s or whatever it is, you've got fairly sophisticated parachutes that attach to it and there are various attachment mechanisms and aerial drop mechanisms, which are really critical. So we think that this is a great business, it's really appreciated by its customers and frankly it's the pioneer in this business and since the 1940s was the original company that designed the device which permit paratroopers to jump out of airplanes and to detach once they hit the ground and not get dragged as a result of the parachute and so that's a very strong business, it's a very nichey business and that's why we thought it fit very well in our specialty products group and of course our specialty product says a lot of connection to the overall, you know, to the other parts of flight support.

Speaker Change #113: So, I think all of our businesses are performing quite well. It's just that there is plenty of past-to-back log in sales actually to be even higher if we had those parts in for more suppliers.

Speaker Change #113: I appreciate that, and if I can do that, it's one Victor, Victor, you touched on it, but I was hoping to talk more about the medical and other area.

Speaker Change #114: in E.T.G., and I almost if we could bifurcate it, because I know the medical portion had that COVID type surge, and now it's kind of normalizing. I imagine the next quarter or two, that we've got to normalize.

Eric Mendelson: So we think that this is a great business, it's really appreciated by its customers and frankly it's the pioneer in this business and since the 1940s was the original company that designed the device which permit paratroopers to jump out of airplanes and to detach once they hit the ground and not get dragged as a result of the parachute and so that's a very strong business, it's a very nichey business and that's why we thought it fit very well in our specialty products group and of course our specialty product says a lot of connection to the overall, you know, to the other parts of flight support. So I think it's a very good fit. Yeah, we're very excited about it. Excellent.

Speaker Change #115: is the broad economy negatively impacting the other portion of medical and other, or are you not speaking?

Speaker Change #116: is that growing more strongly than medical is.

Speaker Change #117: Yeah, I think what happened in medical is we had very strong orders.

Speaker Change #118: in actually at 21.

Speaker Change #119: 22 at first in the things we make, it was some of it was stronger but a lot of it was weaker because if you remember they talked about the elected procedures.

Speaker Change #119: and things like that that were deferred and then there was a surge in 21 and 22 and even part of 23.

Larry Solow: So I think it's a very good fit. Yeah, we're very excited about it. Excellent. I guess just last question, House Recall, it's just on the margin, you mentioned respectfully on the FSU and ETG up to 25 and 27% on the CAS operating margin. Perhaps not so much in the next quarter, too, but you know, what do you see those margins over the next three to five years? I mean, can they continue to to tick up on the CAS side?

Speaker Change #119: and then I think what happened was the manufacturers concluded they had.

Eric Mendelson: I guess just last question, House Recall, it's just on the margin, you mentioned respectfully on the FSU and ETG up to 25 and 27% on the CAS operating margin. Perhaps not so much in the next quarter, too, but you know, what do you see those margins over the next three to five years? I mean, can they continue to to tick up on the CAS side? You look out. So the answer to your question is, as we continue to grow the volume of the business, we expect to think out incremental margin gains consistent with our history, you know, as the base of the business grows, you know, the amount of overhead needed to support is relative to that growth.

Speaker Change #119: Too much on the shelves.

Speaker Change #120: and I think maybe some of the orders at our customers level, right, for the end users.

Speaker Change #120: did not materialize or they were slower. They've had to work through those.

Speaker Change #120: you know, that inventory and we're now seeing more.

Larry Solow: You look out. So the answer to your question is, as we continue to grow the volume of the business, we expect to think out incremental margin gains consistent with our history, you know, as the base of the business grows, you know, the amount of overhead needed to support is relative to that growth. It's a little, it's a little lower. So I expect we'll get that if you look back, you know, I've quoted this before.

Speaker Change #120: of the customers coming back to us saying, you know what, can you move things to the left, right? And it was supposed to move them out to the right, but for as opposed to deferring them, there, can you pull these in? Can you ship sooner? We were going to defer this order, but now we're not going to right. We were having discussions like those.

Speaker Change #121: I don't know if it's a sign of the broader economy as well, mixed into it. It's a good question and I wish I had great visibility on that but I do know at the very least it seems like a classic case of overordering.

Eric Mendelson: It's a little, it's a little lower. So I expect we'll get that if you look back, you know, I've quoted this before. If you look back a decade and look at the margin games, you know, over that, that's kind of what I would expect going forward. Once we sell into our into our footprint here in the FSG and ETG and I do think, you know, you're talking about an EBITDA margin. So it's pretty elevated. We were happy with it this quarter. And I think that as we move forward, that should continue to stabilize any count improvements.

Larry Solow: If you look back a decade and look at the margin games, you know, over that, that's kind of what I would expect going forward. Once we sell into our into our footprint here in the FSG and ETG and I do think, you know, you're talking about an EBITDA margin. So it's pretty elevated. We were happy with it this quarter. And I think that as we move forward, that should continue to stabilize any count improvements.

Speaker Change #122: and higher expectations for, let's say, the actual healthcare delivery from the healthcare delivery system out of the manufacturers.

Speaker Change #123: Okay, so it sounds like you think the de-stocking is about over in the next quarter or so, it sounds like

Eric Mendelson: All right, excellent. Thanks, everybody. Welcome.

Larry Solow: All right, excellent. Thanks, everybody. Welcome. Thanks.

Speaker Change #124: Yeah, that's how it feels to me, you know, I would say where I've seen some signs, some green shoots, so to speak, but it feels more kind of in this bottom or bottoming mode, but we're seeing much higher quotactivity.

Eric Mendelson: Thanks.

David Strauss: We'll take our next question from Peter Armet with Fared. Thanks. Good morning, Larry. Victor, gross. Nice, nice, nice results. Victor, could you talk a little bit about, you know, you talked about some of the booking rates and sort of the competence and sorry, seeing ETG growth thinking about next year. But just, you know, maybe some of the end markets that we're seeing is defense. I assume it's almost 50% of your segment.

Larry Solow: We'll take our next question from Peter Armet with Fared. Thanks. Good morning, Larry. Victor, gross. Nice, nice, nice results. Victor, could you talk a little bit about, you know, you talked about some of the booking rates and sort of the competence and sorry, seeing ETG growth thinking about next year. But just, you know, maybe some of the end markets that we're seeing is defense. I assume it's almost 50% of your segment.

Speaker Change #124: and usually not always, but usually that's an indication that gets followed up by orders not long after.

Speaker Change #125: Okay, great, thanks guys!

Speaker Change #126: Thank you, please. Thank you.

Speaker Change #126: We'll take our next question from Louis Rethado with Wolf Research.

David Strauss: Is that growing, you know, mid single digits and it's just as other areas that are seeing some softness or maybe just a little more color. Thanks. Yeah, so Peter, the defense part of the business and commercial aviation really have been extremely strong, experiencing double-digit growth. And again, that's where some of our longer-term bookings really come on the defense side. And I'm seeing some of those fill out beyond 25. As well as some of the quote activity in the order indications, again, to 25 and beyond.

Larry Solow: Is that growing, you know, mid single digits and it's just as other areas that are seeing some softness or maybe just a little more color. Thanks. Yeah, so Peter, the defense part of the business and commercial aviation really have been extremely strong, experiencing double-digit growth. And again, that's where some of our longer-term bookings really come on the defense side. And I'm seeing some of those fill out beyond 25. As well as some of the quote activity in the order indications, again, to 25 and beyond.

Louis Rethado: and good morning gentlemen.

Louis Rethado: Good morning, Louis. Good morning.

Louis Rethado: Maybe I could just start with a couple things I noticed in a impairment charge, not something we see from you guys, so just curious if you had any sort of additional information about that, and is that at all related to the change in the contingency consideration as well, just not sure if those.

Speaker Change #128: A kind of off-study, each other on any containment or if one was in one spot and one was somewhere else.

Speaker Change #128: So, this is Carlos Lewis, the impariment charge and the contingent contingency reversal were both within the E.T.D. segment. They were for two different subsidiaries. One was related to...

David Strauss: So right now, I feel like the fence is a good leader for us. And commercial aviation has really been phenomenal. So when I take that together, I look at the other markets, which are down consistent with I think what other people are seeing in these kinds of markets. And it looks like those order rates are bottoming out. It appears to us that our customers have kind of used up the excess inventory and orders are coming in.

Larry Solow: So right now, I feel like the fence is a good leader for us. And commercial aviation has really been phenomenal. So when I take that together, I look at the other markets, which are down consistent with I think what other people are seeing in these kinds of markets. And it looks like those order rates are bottoming out. It appears to us that our customers have kind of used up the excess inventory and orders are coming in.

Speaker Change #128: A business we have that is in the space industry where some of the markets have changed, the revenue projections have come down. So this was a trade name impairment. It's just...

Speaker Change #128: is essentially math. The business is doing fine. It's just our expectations were a little higher on the business when we bought it. As far as putting a value to a trade name and so we came to the conclusion this quarter that

David Strauss: And you know, if you add a sort of six-month lead time on that, it gets us into, you know, into fiscal 25. And that's why I say I feel like there will be a very nice tailwind from that next year. Of course, I can't be certain that, but that's just how it feels right now.

Larry Solow: And you know, if you add a sort of six-month lead time on that, it gets us into, you know, into fiscal 25. And that's why I say I feel like there will be a very nice tailwind from that next year. Of course, I can't be certain that, but that's just how it feels right now. And if any of you impact it, this is Carlos. I just want to point out, you know, you're not wrong on what you said about 50% of the segment.

Speaker Change #128: Then we would impair that trade name a bit.

Speaker Change #128: The contingent turnout was due to change in circumstances.

Speaker Change #128: at one of our subsidiaries, whereby the likelihood that they would need to earn out objectives was low. And it was kind of a cliff or an out, so it was an all or nothing thing. So that occurred this quarter when it became apparent to us.

Carlos Macau: And if any of you impact it, this is Carlos. I just want to point out, you know, you're not wrong on what you said about 50% of the segment. But right now, we're tracking around 40%. So we still have, I've mentioned in the past, you know, once the mix sort of settles down, I do expect our defense to become closer to the 50% number over time. Right now, we're still a little behind on, you know, on the total revenues in the segment being only around 40% for defense this quarter. Okay, that's helpful.

Speaker Change #128: that they weren't going to earn that or not. So, it's a coincidence they happen at the same time, two different selves.

Larry Solow: But right now, we're tracking around 40%. So we still have, I've mentioned in the past, you know, once the mix sort of settles down, I do expect our defense to become closer to the 50% number over time. Right now, we're still a little behind on, you know, on the total revenues in the segment being only around 40% for defense this quarter. Okay, that's helpful. And then just Carlos may just stick with you on the leverage.

Speaker Change #128: They both went through selling, they weren't through general administrative expenses so they kind of offset each other a little bit of a non-event.

Speaker Change #129: All right, appreciate the color Carlos. And then maybe just the the capable deal. I know, you know, it's not hugely material, but anyway, just the size at least from a, you know, cash usage in the fourth quarter.

Speaker Change #130: Yeah, I don't think I don't believe they're going to...

Speaker Change #131: I don't think it's going to be a big cash usage. I mean, we borrowed for the majority of the acquisition. It's, you know, it should be a good deal for it, it's a good margin business. It, as Eric pointed out, it does nitchy stuff in aviation parts.

Carlos Macau: And then just Carlos may just stick with you on the leverage. It's come down exactly where you guys kind of thought it would to 2.1 turns.

Larry Solow: It's come down exactly where you guys kind of thought it would to 2.1 turns. You know, how are you thinking about, you know, just given that the M&A pipeline is full, but your ability to kind of, you know, want to still deliver what's any updated thoughts on kind of where you're taking the leverage to. Well, I think, you know, look, by nature, we're an acquisitive company and we set out an aggressive timetable to pay down some of the debt that we had and we've done that.

Carlos Macau: You know, how are you thinking about, you know, just given that the M&A pipeline is full, but your ability to kind of, you know, want to still deliver what's any updated thoughts on kind of where you're taking the leverage to. Well, I think, you know, look, by nature, we're an acquisitive company and we set out an aggressive timetable to pay down some of the debt that we had and we've done that.

Eric Mendelson: and Submilitary, and so...

Speaker Change #132: You know, more to come, we'll see, it's not a, you know, it's an immature acquisition of RICO and total, so we're not giving out too much of the financial details or anything like app, but it, uh...

Eric Mendelson: It is not dilutive to the segment margins, if that's part of your question. Yeah, I can tell you, I'm really excited about this business, excited about the technology, the people, the capability, you know, you look at what, you know, on the two businesses, I mean, one is the cockpit or aircraft egress.

Carlos Macau: I think the opportunities are a bound as long as we can keep our leverage. Candidly under 3. There's opportunities for us and I think that, you know, the goal for us is to find very profitable companies that they don't disrupt that leverage. You know, the ones that have real high EBITDA, which have been, which has been our history, right? I mean, we like high margin businesses. So the more acquisitions we do with the higher margin, the less impact it has on that leverage and that's where I'm steering things when we talk internally about about these deals.

Larry Solow: I think the opportunities are a bound as long as we can keep our leverage. Candidly under 3. There's opportunities for us and I think that, you know, the goal for us is to find very profitable companies that they don't disrupt that leverage. You know, the ones that have real high EBITDA, which have been, which has been our history, right? I mean, we like high margin businesses. So the more acquisitions we do with the higher margin, the less impact it has on that leverage and that's where I'm steering things when we talk internally about about these deals. Terrific. I'll leave it there. Thanks, guys.

Carlos Macau: Terrific. I'll leave it there.

David Strauss: Thanks, guys.

Eric Mendelson: These are really critical, very cost-effective solutions. If you don't have these solutions in the airplane catches on fire in certain situations, it's going to be really bad. And these solutions are time-tested and work extremely well.

Eric Mendelson: So we're really happy for them to be in the Hicob Portfolio. And if you look at the military threats that are facing this country and the world today, the aerial drop solutions are really, really critical.

David Strauss: We'll take our next question from David Strauss with Barclays. Morning, David. Morning. Thanks for taking the question. One to ask about working capital, you know, last year you had a fairly big inventory build this year, fairly big inventory build. How are you thinking about potentially, you know, floor growth or working capital or maybe working capital just coming down on absolute basis from here?

Eric Mendelson: Super Super Critical, and we're working on a number of programs with various militaries around the world. But if you've got a deliver material at a hotspot,

Eric Mendelson: where you don't control the ground. This is the only way to do it. There's all sorts of neat technology going on now, which is going to further drive this.

Eric Mendelson: Hey David, this is Eric, I'll start out with sort of the big picture and then Carlos to get into the specifics on the financial. You know, Heico has always been focused on customers service and making sure that we capture all of the incremental sales that we can capture. And if you look at coming out of COVID, Heico recovered much quicker than most. And as a result of not cutting our people, not trimming our inventories too much in bottom line, we were able to support the market when others weren't.

Eric Mendelson: Because now, of course, we're able to have these autonomous vehicles, you're able to drop all sorts of autonomous vehicles. And there's going to be a huge demand for this.

Speaker Change #133: So we think that it's really a good space to be in great name, this company, I mean, was the, what was the pioneer in this space.

Speaker Change #133: and you know whether it's paratroopers or they also have the ejection seat.

Eric Mendelson: And that's really been a huge Heico advantage. So I can tell you from an operational perspective, Victor and I are very, very focused on all of our business units, reviewing a working capital, understanding specifically, you know, how the inventory or the receivables have increased obviously receivables that that's up due to the huge increase in sales. But with regard to inventory, our businesses have been really outstanding in terms of having the correct inventory on the shelf.

Eric Mendelson: There are a lot of companies where their inventory blows up and they've got the wrong stuff on the shelf and they can't sell it and then people find out after the fact that it's a problem. Heico has always been very, very careful not to do that. And as a result, we have very, very robust inventory reserve policies to make sure that we're being very proactive and we make sure that we have the right inventory.

Eric Mendelson: So I think that there's no question that there is a big internal focus on inventory. We want to slow the growth. But it is really key to our business. And frankly, you know, when you look at the 17% organic growth that we had in the aftermarket business, I mean that that was really outstanding and that can only be accomplished through increased inventories, but Carlos will get into the specifics for you. I don't know how much more I could add to that.

Eric Mendelson: I would say that the rate of increase in inventory spend has come down relative to the growth in the business. I mean, our sales are for the quarter or up 37% comparatively and are in our use our inventory spends not not ramping at that pace. So I'm happy with that. I think what I mentioned earlier in the year, David, we had a fair amount of orders outstanding on firm commitment inventory that some of our subsidiaries had made two years ago, just because of lead times.

Eric Mendelson: And so we made good on those. We're not the type of company that just disrupts our vendor base or does bad things are vendor base to take advantage of a moment in time, going to be partners with our vendors and make sure that we're good to them as they we expect them to be good. So the rate of those firm orders has come down. We're now sort of beyond that and I do expect use of working capital, particularly inventory to come down a little bit, but it will continue to grow a little bit as we as the business grows as Eric pointed out. So, you know, I wasn't displeased as quarter with the working capital use. We expected it. And again, the rate of change in that inventory spend is down considerably compared to the first half of the year.

Eric Mendelson: And also, David, just to add one other little anecdote. Of course, the purchase of the 737 ng and triple seven display unit business was the purchase of a product line. And as a result, a good chunk of the inventory increase was due to that. So that really is an acquisition. It's a new business. It's all good inventory, but that that obviously shows up as inventory. So you have to sort of take that into account. So when that's stripped out, the increase is much smaller.

Carlos Macau: Great, thanks for the detailed answer. The other question I had on SSG margins, I know you talked about the year-over-year improvement, but margins did drop, you know, gap margins did drop a little bit sequentially. What drove that 50 basis point drop sequentially? Was that mix or something else? There's, I think David, what we've told folks, there's nothing unusual about what's happening in the margins sequentially. I think what we've told folks is that we expect the segment to run between 22%, maybe size 23, as it has been in the last quarter.

Carlos Macau: I don't think there's any unusual going on, it's ebbs and flows, you have a little shift in mix, is Eric pointed out some of the commercial business was down, especially products. You know, the parts business is doing very well, that is margin helpful, the repair business is growing also, that's a little bit less accretive than the parts business, so you're going to have puts and takes as we get the business to sort of settle into the vertical footprints of the segments, so I wouldn't look, there's no one times or odd things going on in there.

Carlos Macau: But David, this is Eric also the way that I look at it from an operating perspective, is a year ago, our EBITA margin, or what we call the flight support group cash margin, in the third quarter, was 23.4%. This year, despite the acquisition of Winkor, which was at sort of a lower cash margin, we've been able to increase the cash margin up 180 basis points to 25.2%. So, I think those numbers are really outstanding, and as Carlos says, they just bounce around, I mean, that's why we say it's going to be within a certain range, but that's just standard noise. Okay, thanks very much.

Carlos Macau: Thank you.

David Strauss: Thank you.

Pete Skubicki: I'll take our next question from Pete Skubicki with Olympic Global. Good morning, guys. I guess to start with Eric, Eric, last quarter you guys talked about the supply chain, negatively impacting the repair business, and I think maybe it sounds like it drove the business.

Eric Mendelson: So, can you talk through kind of, do you see any light at the tunnel there, or maybe more specifically what's going on with the supply chain? Yeah, I would say, we definitely have supply chain problems all over the business. It, our vendors are challenged. There's a huge demand out there, and getting we really got to be on top of your supply chain. You got to be on top of your vendors to make sure that you're prioritized, and that they do is what they expect.

Eric Mendelson: We still have a large backlog of past due, and frankly, that's driven by certain vendors, or many vendors, inability to produce, according to their commitment. So, that continues to be a struggle, and frankly, I don't see a tremendous amount of improvement in the aviation supply chain. Basically, demand is just outstripping supply. A lot of people retired. Some businesses shut down, some businesses lost there, if you will, special processes. Despite everyone knowing that this is a high-tech industry, there are a lot of, I would say less documented processes out there with suppliers, when they didn't need to produce for a period of time largely as a result of certain large OEMs ripping out all their orders very quickly, those folks retired and a lot of these special processes went away undocumented.

Eric Mendelson: And the industry has really struggled. And I think this is why if you look at the air framers, the engine manufacturers, they have really, really struggled as a result of their actions and basically slashing the supply chain the way they did. This is why Heico, we fought like hell to keep our people, to lay off as few as possible to figure out how people would go to reduce schedules, because we knew that when the industry came back, we wanted to make sure that our most valuable asset was going to come back.

Eric Mendelson: This is why Heico, we fought like hell to keep our people, to lay off as few as possible to figure out how people would go to reduce schedules, because we knew that when the industry came back, we wanted to make sure that our most valuable asset was going to come back. And I can tell you that there are companies out there who just went and cut 40%, 50% of their workforce is not on a temporary basis but on a permanent basis.

Eric Mendelson: And I can tell you that there are companies out there who just went and cut 40%, 50% of their workforce is not on a temporary basis but on a permanent basis. And as a result when they go back and they try to hire these folks, they can't get them back because some are retired, some are pissed off, all sorts of reasons. So, you know, it's a long road back. And I think that's why the major manufacturers are having a big, big problem. Okay.

Eric Mendelson: And as a result when they go back and they try to hire these folks, they can't get them back because some are retired, some are pissed off, all sorts of reasons. So, you know, it's a long road back. And I think that's why the major manufacturers are having a big, big problem.

Eric Mendelson: So you think just go forward, you expect the parts business to grow faster because that business you're less beholden to suppliers versus the repair business. I wouldn't say, it's hard to say which will grow faster. You know, we're pretty confident of our growth in both. You know, there's no question that when you ship individual parts, you are less impacted by a particular supplier's inability to supply because you can ship all the other parts that you have in stock.

Eric Mendelson: Okay. So you think just go forward, you expect the parts business to grow faster because that business you're less beholden to suppliers versus the repair business. I wouldn't say, it's hard to say which will grow faster. You know, we're pretty confident of our growth in both. You know, there's no question that when you ship individual parts, you are less impacted by a particular supplier's inability to supply because you can ship all the other parts that you have in stock.

Eric Mendelson: Whereas when you're overhauling a component or, you know, a line replaceable unit, L-R-U, you can only ship the component if you have all the parts. So if there's a bill, a material of 200 parts, and you're missing one, you're not shipping that unit. So that creates complications. And of course, when you're building a complex assembly like an airplane or an engine, you have that problem in space. So, but I think all of our businesses are, you know, are performing quite well. It's just that there is plenty of past due backlog and sales actually can be even higher if we had those parts in from our suppliers. Okay, that's all I appreciate that.

Pete Skubicki: Okay, that's all I appreciate that.

Victor Mendelson: And if I can just ask one to Victor Victor, you touched on it, but I was hoping to talk more about the medical and other area in ETG. And I know almost if we could bifurcate it because I know the medical portion had that, you know, COVID type surge. And now it's kind of normalizing. I imagine the next quarter or two, that'll kind of normalize. But, you know, it is the broad economy negatively impacting the other portion of medical and other, or are you not, is that growing more strongly than medical?

Victor Mendelson: Yeah, I think what happened in medical is we had very strong orders in actually at 21, 22 at first and the things we make, it was some of it was stronger but a lot of it was weaker because if you remember they talked about the elected procedures and things like that that were deferred. And then there was a surge in 21 and 22. And even part of 23. And then I think what happened was the manufacturers concluded they had too much on the shelves and I think maybe some of the orders at our customers level for the end users did not materialize or they were slower.

Victor Mendelson: They've had to work through those, you know, that inventory and we're now seeing more of the customers coming back to us saying, you know what, can you move things to the left, right? You know, as opposed to moving them out to the right before as opposed to deferring them there, you know, can you pull these in? Can you ship sooner, we were going to defer this order but now we're not going to write we were having discussions like those.

Victor Mendelson: I don't know if it's a sign of the broader economy as well mixed into it. It's a good question and I wish I had great visibility on that, but I do know at the very least it seems like a classic case of overordering. And higher expectations for let's say the actual healthcare delivery from the healthcare delivery system out of the manufacturers. Okay, so it sounds like you think that the destocking is about over the next quarter or so it sounds like.

Victor Mendelson: Yeah, that's how it feels to me, you know, I would say where I've seen some signs some green shoots so to speak, but it feels more kind of in this bottom or bottoming mode. And but we're seeing much higher quote activity and usually not always, but usually that's an indication that gets followed up by orders not long after.

Victor Mendelson: Okay, great. Thanks, guys.

Louis Raffetto: Thank you, please. Thank you.

Louis Raffetto: We'll take our next question from Louis Rapotto with Wolf Research. Hey, good morning, gentlemen. Good morning, Louis. Good morning.

Louis Rapotto: We'll take our next question from Louis Rapotto with Wolf Research. Hey, good morning, gentlemen. Good morning, Louis.

Carlos Macau: Good morning. Maybe I can just start with, I guess, a couple things I noticed impairment charge, not something we see from you guys. So just curious if you had any sort of additional information about that. And is that at all related to the change in the contingency consideration as well? Just not sure if those kind of offset each other on the statement or if one was in one spot, one was somewhere else.

Carlos Macau: Maybe I can just start with, I guess, a couple things I noticed impairment charge, not something we see from you guys. So just curious if you had any sort of additional information about that. And is that at all related to the change in the contingency consideration as well? Just not sure if those kind of offset each other on the statement or if one was in one spot, one was somewhere else. So this is Carlos Lewis, the the impairment charge and the contingent contingency reversal were both in the ETG segment.

Carlos Macau: So this is Carlos Lewis, the the impairment charge and the contingent contingency reversal were both in the ETG segment. They were for two different subsidiaries. One was related to a business we have that is in the space industry where some of the markets have changed the revenue projections have come down. So this was a trade name impairment. It's just essentially math. The business is doing fine. It's just our expectations were a little higher on the on the business one we bought it as far as putting a value to a trade name.

Carlos Macau: They were for two different subsidiaries. One was related to a business we have that is in the space industry where some of the markets have changed the revenue projections have come down. So this was a trade name impairment. It's just essentially math. The business is doing fine. It's just our expectations were a little higher on the on the business one we bought it as far as putting a value to a trade name.

Carlos Macau: And so we came to a conclusion this quarter that that we would impair that trade name a bit. The contingent earn out was due to change in circumstances at one of our subsidiaries whereby the likelihood that they would need to earn out objective. It was low and it was kind of a cliff earn out so it was an all or nothing thing. So that that occurred this quarter when it became apparent to us that they weren't going to earn that earn out.

Carlos Macau: So that it's a coincidence they happen at the same time two different. They both went through selling, they went through general administrative expenses so they kind of offset each other. It was a bit of a non-event. Alright, appreciate the color, Carlos.

Eric Mendelson: Alright, appreciate the color, Carlos. And then maybe just the, the, the capable deal. I know, you know, it's not hugely material, but anyway, just a size at least from a, you know, cash usage in the fourth quarter. Yeah, I don't think, I don't believe they're going to, I don't think it's going to be a big cash usage. I mean, will, we, we borrowed for the majority of the acquisition. It's, you know, it should be a good deal for it.

Eric Mendelson: And then maybe just the, the, the capable deal. I know, you know, it's not hugely material, but anyway, just a size at least from a, you know, cash usage in the fourth quarter. Yeah, I don't think, I don't believe they're going to, I don't think it's going to be a big cash usage. I mean, will, we, we borrowed for the majority of the acquisition. It's, you know, it should be a good deal for it.

Eric Mendelson: So it's a good margin business. It's, as Eric pointed out, it does nitchy stuff in aviation parts and submilitary. And so, you know, more to come. We'll see. It's not a, you know, it's an immaterial acquisition of Raiko and total. So we're not giving out too much of the financial details or anything like that, but it, it is not dilutive to the segment margins. If that's part of your question. Yeah. I can tell you I'm really excited about this business.

Eric Mendelson: Excited about the technology, the people, the capability. You know, you look at what, you know, on the two businesses, I mean, one is the cockpit or aircraft egress. Now, these are really critical, very cost effective solutions. If you don't have these solutions and the airplane catches on fire in certain situations, it's going to be really bad. And these solutions are. Time tested and work extremely well. So we're really happy for them to be in the Haiko portfolio.

Eric Mendelson: And if you look at the military threats that are facing this country and the world today, the aerial drop solutions are really, really critical, super, super critical. And, you know, we're working on a number of programs with various militaries around the world. But you've got, if you've got a deliver material at hotspots where you don't control the ground, this is the only way to do it.

Eric Mendelson: And there's all sorts of neat technology going on now, which is going to further drive this because now, of course, you're able to have these autonomous vehicles, you're able to drop all sorts of autonomous vehicles. And there's going to be a huge demand for this.

Eric Mendelson: But you've got, if you've got a deliver material at hotspots where you don't control the ground, this is the only way to do it. And there's all sorts of neat technology going on now, which is going to further drive this because now, of course, you're able to have these autonomous vehicles, you're able to drop all sorts of autonomous vehicles. And there's going to be a huge demand for this. So we think that it's really a good space to be in great name, this company, I mean, with the paper, it was the pioneer in this space.

So we think that it's really a good space to be in great name, this company, I mean, with the paper, it was the pioneer in this space. And, you know, whether it's paratroopers or they also have the ejection seat release mechanism. So if you eject from fighter aircraft and you've got a release as you, you know, at a certain point, you're able to do that. And there really very, very well.

Eric Mendelson: And, you know, whether it's paratroopers or they also have the ejection seat release mechanism. So if you eject from fighter aircraft and you've got a release as you, you know, at a certain point, you're able to do that. And there really very, very well.

Q3 2024 HEICO Corp Earnings Call

Request a DemoDemo

HEI

Heico

Earnings